Oil demand to peak in three years, says energy adviser DNV GL

Global oil demand will peak in three years, plateau until around 2030 and then decline sharply, energy adviser DNV GL said in one of the most aggressive forecasts yet for peak oil.

Most oil companies expect demand to peak between the late 2020s and the 2040s. The International Energy Agency (IEA), which advises Western economies on energy policy, does not expect a peak before 2040, with rising petrochemicals and aviation demand more than offsetting declining oil demand for road transportation.

Wednesday’s annual report from DNV GL, which operates in more than 100 countries and advises both oil and renewable energy companies, would appear to be at odds with ongoing investment in developing new oil and gas fields.

“The main reason for forecasting peak oil demand in the early 2020s is our strong belief in the uptake of electric vehicles, as well as a less bullish belief in the growth of petrochemicals,” Sverre Alvik, head of DNV GL’s Energy Transition Outlook (ETO), said in an email to Reuters.

While DNV GL’s latest forecast shows oil demand peaking in 2022, one year sooner than it estimated last year, the difference is marginal and demand is expected to remain relatively flat over the 2020-2028 period, Alvik added.

DNG GL expects electric vehicles to reach 50% of global new car sales in 2032, compared with last year’s forecast of the mid-2030s. By the middle of the century 73% of the global passenger car fleet will be electric-powered, up from 2.5% today, the company estimates.

In Norway, where the DNV GL has its headquarters, more than 40% of all new cars sold in the first eight months of this year were electric — the highest proportion in the world. The government wants this to reach 100% by 2025.

Demand for natural gas, which oil companies say could serve as a bridge in the global transition from fossil fuels to renewable energy, is seen surpassing oil demand in 2026 and plateauing in 2033, DNV GL said.

Meanwhile, electricity’s share of the total energy mix is predicted to double by mid-century to 40% of today’s levels, with solar and wind generation accounting for two thirds of electricity output.

Annual power grid spending is forecast to more than double to $1.7 trillion to connect thousands of new solar and wind farms and millions of electric vehicles.

Meanwhile, upstream fossil fuel investment as a proportion of total energy expenditure is seen dropping to 38% from 68%, DNV GL said.